Positive Impacts of Child Labor on Households Income

Generally children of up to 14 years of age who are economically active are referred as Child Labor. This has been evident that child labor exists everywhere in developed and developing countries in different shapes but researchers associate this issue more often with developing countries. Our study aims to realize child labor as an opportunity and highlights its positive impacts on households in terms of contribution in their income, business inters of contribution in productivity and overall growth of economy of Pakistan. This research work is equally effective for Government Agencies, Teachers and Students.

INTRODUCTION

Although child labor is an age-old phenomenon and of enormous importance in the contemporary world, there has been little formal analysis of this issue. In recent years, there has been a growing interest in child labor among academics, professionals and the media. While the existence of child labor is frequently condemned as odious and immoral by various governments, policy makers, Non Government Organizations (NGOs) and International Organizations including International Labor Organization, World Bank etc. all around the world but the real issue is to better understand the determinants of child labor so as to evaluate its welfare implications.

Many studies have been conducted to identify the root causes of this issue and more often perhaps negatively associated with poverty and less education but there are hardly few studies or papers which speak about the importance of child labor for the countries particularly underdeveloped countries.

Central to our study and analysis is to work out the possible positive impacts of child labor on households' income, business houses and overall economies of underdeveloped countries in general and particularly Pakistan.

Our analysis adds to the literature on child labor in a number of ways. As in Eswaran (1996) and Basu and Van (1998), we find that child labor is a facet of poverty. However, in neither of their papers is there a clear-cut welfare argument that suggests that child labor is wasteful. Grootaert and Kanbur (1995) suggest that if there is a trade-off between child labor and education, then child labor can be inefficient if there are positive externalities to human capital accumulation. In our view, even when the social return to human capital is ignored, the nature of interfamily resource allocation may stop even the private return from being captured, and we present two new arguments as to why this might be so.

OBJECTIVES

Following are the core objectives of this study:

To explore the positive impacts of Child Labor on Underdeveloped/less developed economies.

To discover the contribution of Child Labor in household income.

To walk around the contribution of Child Labor in business houses.

To explore the contribution of Child Labor in Economic Growth of Pakistan.

SIGNIFICANCE

Hundreds of studies, articles and research papers have been published on child labor but one thing is common in most of these studies, articles and research papers that is all of them are directed to identify the reasons of child labor. Governments and NGOs have tried a variety of laws and interventions to reduce child labor. Some countries have enacted laws prohibiting firms in their country from employing children under the age of fifteen. Organizations such as ILO, the WTO, and UNICEF have established conventions and encouraged nations to ratify them. The most powerful and controversial supranational institution to curb child labor is the imposition of international labor standards but the world has been slow to adopt them. Some countries have considered legislation and actions to curb child labor in developing countries. For instance, the Child Labor Deterrence Act debated in the US congress seeks to disallow the import of goods that produced with the help of child labor.

In contrast to these criticisms on child labor, our study aims to make it realize the benefits of child labor for the households, business houses and for economic growth as well. Since all underdeveloped countries including Pakistan have been characterized with limited resources, low per capita income, poor living standards, economic disparities, lack of technical know how and huge brain drain therefore child labor is crucial for these countries in order to compete in such a stiff global competition. Country like Pakistan which stands at world's sixth most populous country in the world with an estimated population of 169.9 million at the end of June 2009 with annual population growth rate of 2.05% and its population up to 14 years of age is shown as under:

Table-1: Population by Age of Pakistan

Projections (000s)

Age Group

2005

2010

0 - 4

9,562

11,886

5 - 9

10,047

9,287

10 - 14

10,130

9,936

Source: Economic Survey of Pakistan 2009-2010

So it is very difficult for Pakistan to increase its living standards, per capita income and technical know-how, and reducing economic disparities and brain drain without utilizing its human resources who are even under 16 years. This study aims to highlight the importance of child labor for the long run needs of our country.

LITERATURE REVIEW

The comprehensively child labor is defined as the children who are economically active which mean they are engaged in sort of a work which provide them some compensation (wage or salary). Two terms; 'Economic Work' or 'Market Work' is used interchangeably for referring economically active children. Various authors focused on different dimensions while studying child labor like some children work outside termed as 'market oriented work' and some work for their own family as non paid worker, termed as 'non-market oriented work'. Similarly, some authors are of the view that some children work for others but do not receive reward in monetary terms i.e. wage or salary, rather they receive pay in-kind e.g. goods or services.

There are various reasons which result in child labor but mainly three key reasons can be identified; poverty, the relative return and parental preferences. Poverty seems to be a key influence on supply of child labor. Poverty affects the decision of a family about the time of their children and parents might be in trade off position whether they should send their children for work and let them earn for family or just stay home or send to school. When a family wants to get some additional income, they prefer to send their child on some work which results in income. So in this way, more labor is available in labor market. The other reason is the relative return, which means assessing the return of time of a child while he/she is spending in school for getting education in comparison of the time he/she might spend in formal labor market and earn something. If the relative returns from play, education, and household help are lesser than the returns to income and the cost of schooling, parents will prefer to the later returns. As mentioned earlier that there is another reason which results in child labor is the parental preferences which are not associated with time allocation of their children rather it is associated with the comparison of time spent by children on economic activity and non-economic activity. For instance, there is a young boy who works for wage and does not attend school. If the marginal utility from the boy's contribution in standard of living is more than the marginal utility from the return of income, it will definitely affect the supply of labor. Parents might prefer their boy to work rather than getting education. These scenarios may help in deciding that how households take decisions about their children and ultimately affect the labor supply in the market. (Edmonds, 2007)

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Does price changing in schooling affect child labor supply?

Various studies had taken into account a question i.e. Do price changes schooling affect child labor supply? It is evident from the studies that some compensation like some cash or goods which are conditioned with school attendance has meager affect on supply of child labor. For instance, Food For Education (FFE) program was started in Bangladesh in year 2000 for assessing market work participation - people engaged in economic activities and school attendance. According to provisions of this program, families receive food as long as if they send their kids to school for education. It was also observed that this program resulted in higher school attendance but there was only decline in market work participation a third of this increment in school attendance. (Ravallion, and Wodon, 2000)

On the other hand, similar type of study was conducted in Brazil in year 2004 in which market work participation and school attendance was compared. There was a program launched in Brazil for promoting school attendance for poor households by compensating them in monetary if they send their children to school for getting education. The program was named as Brazil's Bosca Escola (BBE). It showed tremendous results and hence, there was greater increase in school attendance than decline in market work participation. (Cardoso, and Souza, 2004)

Do children who are working support their siblings?

Although it is hard to measure the economic contribution of working children to the households because normally their compensation is not monetary terms but this should be kept in mind that contribution of child workers to their family income can be considerable and therefore this aspect can not hide. Similar type of findings was produced in a study in 1997 which showed that on average 13 year olds economically active Bolivian contributes 13% of total family income. (Psacharopoulos, 1997)

Another attempt for computing the contribution of child workers to their family income was made in year 2005 in Nepal. This study showed that in rural Nepal, children contribute approximately 11% of total agriculture production in Nepal in other words rounded to 9% of GDP of Nepal. Furthermore, for poor families, it is essential to get additional income for enabling other family members to maintain the consumption level. Therefore older siblings work for monetary reward and earn some additional money in order to protect younger siblings and encouraging them for education. (Menon et al, 2005)

Does child labor continues to the next generations?

This is another crucial question i.e. does child labor perpetuate across generations? Or in other words, do working children more likely to have working children?

Literature has some evidences relating to this issue; one of them is that besides of the income, parents' education affects children health and nutrition which might return relative low productivity either of school or of work. It was also observed by Barham et al (1995) that low education of parents' leads to lower income which ultimately leads to lower educational investment in the next generation and hence shapes an educational poverty trap.

It was 2003 when a study was conducted in Brazil for assessing either parent's child labor status continues to the next generation or not. This exploratory study chose a sample of over eight thousand children and found that nearly seventeen percent (17%) of children who were working at that moment reported that their father started working prior to 14 years of age and six percent (6%) were those whose father did not work in their childhood. On similar pattern, child labor status of mothers also resulted that 24.3% of children were those whose mother started work in the age of 14 years and around 7.8% were those whose mother did not work in their childhood. (Emerson and Souza, 2003)

Is poverty is main cause of child labor?

A strong belief that poverty is the main reason of child labor and this belief had been strengthen by various international organizations like World Bank and non government organizations all over the world by collecting large amount of data during 1990s. It was reported that in 1990 there were about 79 million children around the world who were active economically and 72% of them were only in Asia continent. But over the years, child labor has been declining in Asia but rising in America and Africa. (Ashagrie 1993)

But if we take into account studies, which were conducted by (Barros & Velazco, 1994) and (Goldbaum, Garcia and Lucinda, 2000) these are of the views that after analyzing the comparative studies of the data from numerous Latin American countries, they found that poverty does not explain the portion of child workers in those nations. Such sorts of findings urge to consider other causes and factors behind child labor. (Barros & Velazco, 1994)

(Goldbaum, Garcia and Lucinda, 2000)

Hence, (Mendelievich, 1979) narrated that child labor is part of the household's risk management strategy which means that the impact of job loss on household's income is more severe on poor households who do not have savings and not even strong credit standing. Thus, low income and the assets constraints may leads to child labor supply. (Mendelievich 1979)

An impact of child labor on labor market equilibrium was studied during 2003 and showed a result that with the arrival of supply of child labor in the labor market, multiple equilibriums can be formed. For the sake of understanding, lets take an example of a poor country where wage rate is low and children are compel to work for raising their income level. For the time being it is assumed that government of that hypothetical country bans child labor. With this action of the government, the firms that are using child labor will be pushed for hiring adults for running their businesses. It is natural phenomenon that adults will demand more wage than those of children. In this way, wage rate will go up. Now, parents would not send their children to work outside. As a consequence, adults would fill the gap which was created by child workers who were imposed ban on their work and now out of the market. Now, assume that law has revoked what will happen? In the market wage rate is high because children are not working now rather adults are on the jobs, this will uphold higher wage rate which ultimately leads to multiple equilibriums in labor market. Economy with this situation would be turning aside that it has moved from inferior equilibrium (where wage rates are low and children are working) to superior equilibrium (where wage rates are high but child labor is not there anymore). Of course it has no justification that complete ban is imposed on child labor even it is costless to implement for the government. Rather enforcing ban on child labor, some restrictions should be there like child worker must be provided hazardous-free work environment. This is because, there are regions with substantial poverty and if ban is imposed on them, this may drive children for social evils like theft, robbery and most severe underground activities like smuggling, gambling or even terrorism. Instead of imposing ban on child labor, make education compulsory along with part time work for poor children. (Basu, 2003)

The trade off between child labor and schooling might tackle only short run poverty because full ban on child labor may affect general equilibrium in the long run. It is almost unbelievable to ban fully in rural regions. (Nardinelli, 1980; Heywood, 1988)

Findings

This section shows the results of our study. This section is further subdivided into to parts; first for Households and the lateral for Entrepreneurs.

Households

Figure - 1 illustrates that the majority families have 7 to 9 children (51%) while 10% of the respondents have 1 to 3 children, 16% of them consist of 4 to 6 children, 14% have 10 to 12 children and 9% of them consist of 12 and more children in their families. It is also clear that 93% of the respondents have 1 to 3 children under the age of 14 years engaged in economic activity and just 7% say that they have 4 to 6 child workers. Hence it's clear that these two positively correlated and resulted 0.53 and there is another indication that greater family size may leads to child labor.

Figure - 2 consists of break-up of males and females of up to 14 years of age who are working as child labor. Data shows that 61% of respondents have 1 to 3 boys and 5% of them have 4 to 6 boys who currently work as child labor while 34% of respondent reported that they do not have boys under 14 years of age who work as child labor. On the other hand, 33% of respondents say that their 1 to 3 girls under age of 14 are economically active whereas 4 to 6 girls cover only 1% of the total and rest of 66% reported that there is no girl of this age group works. This finding states that boys are more likely to work than girls.

Parents education level also affect the supply of child labor. As ascertained from data, just 28% of parents are educated and remaining 72% are not. Interestingly, 63% of those who are educated have academic qualification up to primary level, 22% of them are middle standard qualified, 12% are matriculated and just 2% are intermediate certificate holders. This study also results 11% parents send their children up to 14 years age group for education and 89% of parents do not. Those who send their children to school have answered that 55% are below primary level, 24% are primary level, 11% are under middle and 11% of them are in middle grade. This advocates the findings of Barham et al (1995) that low education of parents' leads to lower income which ultimately leads to lower educational investment in the next generation and hence shapes an educational poverty trap.

Figure - 3 results show that majority of the heads of family i.e. 51% work as an employee (both public and private) for a wage, salary, commission or any payment in kind and 16% are those who run their own small business and 27% are those who work as domestic worker for a wage, salary or payment in kind. Figure - 3(a) shows breakup of income of households from these sources like 45% of the households earn less than Rs. 10,000 per month and there are 35% households who are earning ranging from Rs. 10,000 to Rs. 15,000 and 19% are able to get Rs. 15,000 to Rs. 20,000. In this era of galloping inflation, poor households are of the view that if their children don't earn, they would be living hand to mouth.

Figure - 4 reflects that most the contribution in households' income is made by boys of up to 14 years of age when compared with girls of same age group. Like out of 350 respondents, 11% reported that their children do not work for pay or outside rather they just assist in household business as an unpaid family worker. Whereas 75% of the respondent said that their fewer than 14 years children contribute less than Rs. 6,000 per month in their total household income. Similarly 14% children contribute Rs. 6,000 to Rs. 8,000 per month in parents' income. If a separate analysis is made, it would be clear that out of 75% of those, who bring less than Rs. 6,000 per month, 75% (178/236) are boys and 73% (83/114) are girls. This reflects that children of 14 years of age contribute approximately 31% to 35% in their household income per month.

The other side of picture replicates that 10% of children who are economically active engaged in Agriculture sector (e.g. plucking fruits from the gardens, preparing wooden boxes for packaging of fruits and vegetables, sowing seeds etc.) same in trading sector (e.g. book shops, cosmetics stores etc.) but most of the children i.e. 29% are engaged in manufacturing sector (e.g. iron cables, hosiery, tailoring, carpenters, brick-baking etc.) and 27% are in service sector (e.g. motor workshops, hotels, car wash centers etc.) and 23% are working as domestic servants. Interestingly, most of the domestic workers do not get remuneration rather they bring payment in kind like eatables and cloths.

Entrepreneurs

This is the second part of the findings in which we gathered data from 150 entrepreneurs sampled as a random and found that 21% of them are engaged in agriculture sector (e.g. cultivation, harvesting, selling seeds, fertilizers, parts of machinery used in agriculture sector etc.), 9% engaged in trading sector (e.g. bookstores, cloth merchants, wholesaler of eatables etc.), 43% are in manufacturing sector (e.g. carpenters, molding machines, brick-baking, tailoring, iron cables manufacturing etc.), and 21% are in services sector (e.g. hotels, motor mechanics etc.). Figure - 5 illustrates that most of the entrepreneurs are running small and medium scale businesses and earning a handsome income as 29% entrepreneurs are earning less than Rs. 20,000 per month, 54% of them said they are earning ranging from Rs. 20,000 to Rs. 50,000, 15% of them stated that their per month income remains between Rs. 50,000 and Rs. 80,000 and just 2% of them claimed to earn Rs. 80,000 to Rs. 100,000.

It has also found that 55% of the respondents had been working as a child labor in their childhood and running their own businesses today and 45% said they had not been working as child labor. Figure - 6 shows the per month earning of those who had been engaged in economic activities in their childhood i.e. 55% of total, 88% of them used to earn less than Rs. 6,000 per month and just 12% were able to get Rs. 6,000 to Rs. 8,000 in terms of compensation but now they are earning thousands of times more when compared with their childhoods. Figure - 7 contains the sectors where they had been working in their childhoods and it shows that 6% of them were in agriculture sector, 22% in trading sector, 45% in manufacturing sectors, and 28% were in services for earning their livelihood.

Furthermore, if we analyze data in terms of providing employment opportunities, Figure - 8 exemplifies the breakup of men and women employed by entrepreneurs today including up to 14 years cadre of children. 15% of the entrepreneurs responded that they have employed up to age of 14 years. This shows that how much a child worker can play a vital role in society and ultimately towards uplifting overall economy via providing job opportunities.

CONCLUSION

From the whole discussion we come to conclude that how much child labor is essential and how it can be benefited for the development of a country and it is not a constraint rather policy makers and legislative authorities should consider it as opportunity for the better future. We recommend to Government of Pakistan not to ban or discourage child labor at all. Parliament should develop such rules according to which a standard wage rate for the child workers is determined and establish such institutions where necessary training can be provided to these laborers. This will enhance their efficiency. This way, their livelihood would increase which leads to increase household and businesses incomes and then ultimately overall economic prosperity.